If you are overwhelmed by the minute-to-minute changes taking place in today's computer-technology marketplace, don't worry-- you're not alone! Most executives fear making the wrong decision when considering technology purchases. It's no wonder-- the prospect of explaining to your Board why you spent thousands of dollars on a system that is failing to live up to it's promises is frightening.

Windows `95, World Wide Web, Novell PC networks, Internet, E-mail, fax-on demand, modem servers, broadcast faxing--even if you know the ins and outs of all these products, what about the one(s)being released tomorrow? Just what is "Computer Telephony Integration" anyway? Will it be the next "member service" you'll have to have to stay ahead of the competition? Will it be another fad? Even more worrisome: If it is something you have to have, how are you going to pay for it? How can you be planning to purchase something if you don't even know that it exists?

In this article, I'll discuss planning and budgeting for computer technology. As a starting point: the budgeting process. Is there a better way for you to plan for your technology purchases than the traditional five year plan? Next: financing options. Since I'm not an expert here, I've consulted with those who are--Alice Perez, a US Bank Branch Manager in Sacramento and Margaret Leverense, Executive Director at the American Telemarketing Association. Finally, I want to share some new ways to think about technology--creative, non traditional ways to look at your overall budget to find ways in which a technology solution can save you money in the long run.

We should get started. In the time it has taken you to read just this far, five new software programs have been released or upgraded!

Technology Budgeting 101-Traditional Five-Year Plans Don't Work

When I began selling computer systems to associations, it was quite common for groups to make major computer system purchases. Following lengthy and exhaustive studies and recommendations by committee upon committee, an entire system was purchased and installed--usually including hardware, software, networking, training, programming, and implementation services. Because the investment was so large, the sticking point in the decision process frequently was how to pay for the system. Bankers were consulted, trust funds were eyed, and special "fund-raising campaigns" were considered to get the association "over the hump" of the cost of the new system. It was a major effort involving hundreds of hours of staff and volunteer time.

Following this huge investment of time and money, the annual system cost tended to "settle down" dramatically. With regular maintenance and subscription contracts, occasional programming expense, and new staff training, cost for the next five to seven years were fairly stable, often running as little as 15 percent of the original purchase price annually. This would go on for two to four years. However, at some point the decision is made that now the old system can no longer keep up--it needs to be replaced by something newer, shinier, faster, and more capable. The exhaustive process begins again.

This "customary" systems-acquisition process has two major flaws. First, it takes too long! The time interval between the decision to make a new system is needed and its actual implementation can seem to last forever. My personal record for helping a professional society through this process is four years! Imagine the changes in technology that took place during this period. If the staff thought they were struggling when they asked for a new system, imagine where they were when they finally got one.

In addition to the overwhelming time length of this process, the other problem is that a major economic burden is incurred when a system is finally selected. Everything is new and must be implemented from scratch--including conversion and staff training. Price tags of more than $200,000 are not uncommon for these purchases as the major financial burden is incurred up front. Technology changes so quickly that when you amortize equipment over a five year period, you may spend three and a half years on old technology while you continue to pay for it.

Instead of continuing to use this five-year strategy for your systems acquisition, I strongly suggest you take a more even approach. Rather than replacing everything at once every five years, develop a plan that ensures that part of your system is always up to date in terms of today's technological capability.

Let me explain further. If you know that every four or five years you will completely need a new system, consider budgeting to replace a portion of your system each year. Instead of buying 20 new stations, buy five each year and "rotate" the oldest machines to other purposes. For example, an older 386-computer makes an excellent modem or fax server for your network.

When implemented, this strategy provides many benefits to your association staff. The primary benefit is that your system will be able to "evolve," thus avoiding the turmoil associated with a full-system changeover. Additionally, you are always maximizing your best computer users' skills. By giving the new computers each year to your best users, they will never be hindered by old, slow (in relative terms) equipment that can't effectively run the latest versions of needed software. And last, but certainly not least, you are able to spread the cost of your new system into each year's budget. Rather than needing a huge sum of money every five years, you can allocate the correct amount needed every year to stay current. This is a vitally important strategy that will allow you to afford more technology as time passes.

Financing Your Computer Budget-A Different Approach

Using the previous example of purchasing a $200,000 computer system, let's take a closer look at the two acquisition strategies described. A $200,000 computer purchase, financed at 11 percent APR for five years requires a 30 percent deposit ($60,000) and monthly payments of $3,044. The total loan-repayment cost is $182,667, plus the $60,000 down payment, makes your total system cost over five years $242,667. Of course, only $200,000 was spent on the computer system, the balance was paid as interest. To this you must add the 15 percent per year to cover the cost of maintaining the system. Since this is not paid during the first year, your four-year cost for maintenance is $120,000. Your total system cost over five years now stands at $362,667--$320,000 of which went toward equipment and services.

In contrast, if you were to spread the same systems-acquisition budget over the five years (and beyond), you would be spending all of your money (approximately $72,500 each year) on new equipment and software, as well as on training and maintenance services. Each year, you would be able to spend your money on up-to-date workstations and software. Your training and maintenance budget would remain stable, and the need for implementing a long search strategy for a completely new system would virtually disappear. The best part is, over the five-year period, you get an additional $42,000 to spend on systems, not on interest. Consider it an 11 percent spending bonus on top of your old computer budget!

You may still need a loan to get the initial equipment and services you need to be productive. Instead of the long loan process to get the $200,000 you can finance a smaller amount. Keep in touch with your banker--you can shorten the loan process by asking for an amount already supported by your financials.

Another approach is to lease your equipment. It may be true that you can never keep up with technology--it moves too fast and costs too much. Instead of giving up, consider implementing a different approach. Buy stable technology, such as printers, then lease your computers, which change more often. This will give you the ability to expense the costs of the equipment without ownership. As technology changes, trade in the equipment and lease the newer technology. It is this type of creative thinking that association executives need to survive. Let's look at a few more creative ideas...

Creative Approaches to Expanding Your Technology Budget

For many associations, one of the most difficult steps in a five-year "evolving acquisition" strategy is getting started. Many of you are still paying for your existing system and have no room in your budget to begin buying new systems. Still others need everyone on staff to have a new system (including hardware, software, etc.) today. This transition is perhaps the largest single hurdle I come across in assisting with systems financing. While each association's situation is unique, I recommend associations that need a new system today do the best they can to integrate what they currently have with a minimum new system purchase. Likewise, those currently paying off the last system financed should begin "ramping-up" to this new strategy-buying a few new systems each year and budgeting to keep the software they have current. Each group can gradually alter their acquisition strategies to get the most out of their respective technology budgets.

To facilitate this "ramp-up" strategy, you may need to look beyond the "Computer Systems" line item in your five-year plan to find automation money. Creativity is the key to success here. Most of my recommendations here come from resourceful association executives with whom I have worked.

Here are my favorite ideas:

1. Don't buy more people, buy more technology: Recently an association executive asked me to review his organization's internal processes. Our goal was to use technology as much as possible to avoid adding staff. During the re-engineering process, we devised ways to improve the flow of information , balance the existing staff workload, and respond more quickly to external and internal requests (via e-mail systems, network faxing and on-line services). By implementing my recommendations, we estimate that we will "pay back" their technology investment in less than a year-compared to the cost of adding staff.

2. Look beyond the technology line item: An enterprising association executive recently came up with a great way to afford a World Wide Web home page on our server. With a technology budget already stretched to it's limit, she turned elsewhere. In her publishing budget, she found that by reducing the budgeted run on a brochure, she was able to finance a basic World Wide Web home page. Rather than having "X number" of brochures to mail to people, she instead has the same information available every hour of every day for an entire year! She was also able to afford an e-mail link to her members and prospective members (through her home page) and can link directly to her national's home page. A little ingenuity can go a long way in acquiring more technology for your society.

3. Reduce your day-to-day expenses with new technology: One client recently implemented two new computer technology solutions that are directly reducing their day- to-day, budgeted operating expenses. First, they looked to their budgeted faxing expenses. Instead of continuing to use MCI Fax Services for broadcast faxing, they determined they could bring an inexpensive "fax-server" system in-house. By investing in this technology, they used the same money to add additional technological capacity. Next, they looked at reducing the cost of bad mailings. They opted to purchase Group1's AccuMail software to "screen" their database for inaccuracies. Now, in addition to saving considerable expense with mailings that are greater than 99 percent accurate, they are doing everything possible to ensure that the message reaches the member. Technology wins again!

In Conclusion

Re-examining your approach to purchasing, financing, and using technology for you association can reap tremendous rewards. By losing the traditional five-year budgeting plan, and moving to an "evolving-acquisition" strategy of regular technological enhancement, you can maximize your society's automation dollars. The costs generally associated with long-term financing can be used for additional technology solutions, further enhancing the product and service offerings available to your members. When it appears your technology budget has run dry for the year, look for other areas where implementing a new solution, or improving an old one, can help your association grow. Redirecting those funds may be the best possible solution for the long term.

- Jaculin Thompson